Hot stocks: SPH, SPH Reit, Keppel, Keppel Reit see active trading after Keppel's counter offer for SPH

SHARES of Singapore Press Holdings (SPH) and Keppel Corp, as well as units of SPH Reit and Keppel Reit, were actively traded on Thursday (Nov 11), after Keppel said it would raise its privatisation offer for SPH.

SPH and Keppel Reit were among the top traded counters by volume in the day.

SPH shares ended Thursday at S$2.31, up 6.9 per cent or S$0.15, with 30.7 million shares worth S$70.5 million changing hands. Keppel Reit units fell 1.7 per cent or S$0.02 to close at S$1.13, with 23.9 million shares worth S$26.6 million changing hands.

Meanwhile, Keppel Corp ended the day down 0.6 per cent or S$0.03 at S$5.28. SPH Reit units ended down 1 per cent or S$0.01 at S$1.01.

Late Tuesday night, Keppel announced it would raise its privatisation offer for SPH to S$2.351 per share by beefing up its cash component. The final offer comprises cash of S$0.868 per share, 0.596 Keppel Reit unit (valued at S$0.685 as at Nov 9) and 0.782 SPH Reit unit (valued S$0.798 as at Nov 9) per SPH share.

Keppel said its revised offer price reflects a change of conditions, stemming from an improved financial performance and the overall economic environment since July.

The offer comes after a consortium of companies, comprising Hotel Properties (HPL) and its managing director Ong Beng Seng, and 2 Temasek-linked entities, CLA Real Estate and Mapletree Investments, announced a potential rival offer for SPH.

The consortium vehicle, Cuscaden Peak, has offered to pay S$2.10 per SPH share in cash.

UOB Kay Hian (UOBKH) recommends SPH shareholders accept the offer, barring a superior competing offer for SPH as a whole, noting that the new offer values SPH at 1.1 times the group's net assets, and 20.6 times the broker's estimates for its FY2022 earnings.

The offer is also 12 per cent above UOBKH's target price of S$2.10 for SPH, which the research team said is justifiable given SPH's attractive UK student accommodation assets and its resilient suburban malls in Singapore and Australia.

Keppel's offer is also compelling given that regulatory approvals have been obtained, UOBKH said. Cuscaden, on the other hand, has yet to embark on this process. Also, SPH can only convene a scheme meeting for shareholders to vote on a competing offer 8 weeks after Keppel's scheme meeting. This which would set back any competitor by months, UOBKH said.

CGS-CIMB recommends SPH shareholders do "nothing for now", as there may be more competing offers for SPH. The revised offer by Keppel is still at a 10 per cent discount to the broker's estimated equity value per share of S$2.60.

It expects Keppel's offer - which uses the units of SPH Reit and Keppel Reit to part-fund the acquisition - will cause a price overhang for both Reits, while the share price of Keppel Reit could swing positively if Cuscaden counters with a higher cash offer that is more compelling than S$2.10.

CGS-CIMB noted, however, that if the deal with Keppel goes through, the potential merger between the two Reits and higher free float would serve as re-rating catalysts for both those Reits.

Both brokerages agree the acquisition is a good deal for Keppel. The integration of SPH's portfolio into Keppel provides the latter with exposure to new areas and also grows its return on equity.

Securities Investors Association (Singapore) (Sias) founder, president and chief executive officer (CEO) David Gerald called the multiple offers for SPH shares a "happy dilemma". He also urged investors to look beyond just the price of the offers, noting that Keppel's revised offer is irrevocable and that the company has waived the material adverse effect clause -- meaning it cannot walk away should SPH's financial condition worsen.

He, too, noted that Keppel has secured the requisite approvals from the Monetary Authority of Singapore and Australia's Foreign Investment Review Board -- approvals that could take additional time to seek for any competing offeror.

Gerald said Sias will hold separate dialogue sessions with SPH and Keppel's CEO at the appropriate time to help shareholders get a better understanding of the offers.

SPH, SPH Reit, Keppel and Keppel Reit called for trading halts on Wednesday (Nov 10) morning, for the dissemination of announcements. All 4 counters resumed trading on Thursday.

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